Credit cards are one of the best tools to manage a person’s personal finance. However, not everyone is eligible for a credit card or might prefer not get into debt. The next best thing is a debit card, which essentially offers similar features minus the risk of overspending.
Unlike credit cards, debit cards in Malaysia also have the benefit of not being tied to many types of fees and charges. There are neither annual fees nor penalty charges, as they are linked to your bank account and how much money you have available in it.
However, recent changes in the US suggest that consumers may be charged a fee each time we make a transaction with our debit card. The Malay Mail reported that a recent US court ruling now allows merchants to pass swipe fees onto their customers.
Previously, merchants were required to absorb fees imposed by banks under agreements with credit card platform operators Visa and Mastercard. But ever since these agreements were overruled last year consumers in the US have begun to experience extra charges on their debit card transactions, charges that can be anywhere between 1.5 and 2.5 percent.
For now the situation has yet to reach our shores, and the matter has gone on appeal just a few days ago in the US but should merchants be allowed to pass on fees to the consumer - would anyone still want to use a debit card if they did?
In a follow up report in the Malay Mail, consumer groups such as FOMCA (Federation of Malaysian Consumers Associations) and Malaysian Muslim Consumers Association were undoubtedly against such a ruling being implemented here. They felt that charging a transaction fee would burden consumers and one source even likened the idea to ‘highway robbery’. It is essentially charging customers to use their own money.
Though Bank Negara has neither confirmed nor speculated on the possibility of such fees on the whole it would be safe to assume that such a move would not only be a burden to Malaysians, but might also serve to discourage the use of debit cards, thus hindering Bank Negara’s efforts to reduce credit card debt.
These are just some of the benefits of debit cards which will be lost to consumers should banks start discouraging debit card use:
- Debit cards are a safer alternative compared to cash. They also double as ATM cards and can be used to withdraw cash for emergencies.
- Debit cards offer more convenient payment methods such as online transactions. Many utility bills these prefer payments via internet banking and standing instructions.
- Debit cards help you control your spending as you cannot spend more than what is available in your bank account.
- Debit cards offer special benefits such as merchant related discounts and reward points.
- Debit cards are not restricted by the holder’s income or age. Unlike credit cards, debit cards are more accessible as long as the holder has enough funds to fulfill their transaction and can be issued to valid customers as young as 12 years-old.
The debit card is an important financial management tool that enables a person to manage spending and payment without fear of racking up interest charges. If merchants insist on passing on their swipe fees onto consumers it would force them to resort to cash transactions which runs wholly against to the government's vision of a cashless society.